Project Bank Account Documentation for Scotland 2013 Edition - Essential Construction Finance Management Tool

SBCC produces building contracts and guides designed to meet the needs of the construction industry in Scotland. They are based on JCT contracts but compliant with Scottish law and practice.

This document contains the three relevant parts, i.e. Project Bank Account Agreement, Additional Party Agreement and enabling Provisions, to enable a project bank account to be set up and operated.

SBCC's Project Bank Account (PBA) Documentation is for parties to a construction contract who wish to adopt the use of a project bank account as part of fair payment practice. It provides a dedicated bank account for the payment by the employer of all monies due under the building contract to the contractor. It provides for sub-contractors as Additional Parties, to be paid for their work using the account. The PBA is designed to support the Governments fair payment guidelines as part of the construction strategy.

Essentially, SBCC's Project Bank Account Documentation:

• is designed for use with Sbcc Standard Building Contracts
• is tailored for the specific requirements of Scottish Law
• is best suited to larger projects (which can justify the cost of setting up a PBA) where there are a number of sub-contractors involved
• provides greater security to the supply chain and may reduce the cost to the client as they help to crystallise payment issues and reduce disputes. The contractor retains control over his supply chain
• can be used on both public and private sector projects.

It offers further security in two critical areas:

• 1) PBAs generally have trust status, so the monies in the account can only be paid out to the beneficiaries named in the agreement
• 2)Money deposited into the PBA is protected in the event of insolvency of the employer and/or contractor, as the money held in the account is 'ring-fenced' due to the trust status.

The SBCC PBA (like the JCT PBA for English projects) is superior and stronger than other mechanisms currently available and therefore provides contractors and sub-contractors with a more confident position and removes unnecessary risk. It provides comfort to contractors and sub-contractors that monies will be paid into and out of the account in terms of the signed Agreement and Bank Mandate. Once the monies are paid in the employer will have no further right to them and the contractor may only withdraw monies owned by him. The contractor and sub-contractor both acknowledge that payment into the account discharges the employer or contractor.

This is a positive step towards protecting payment and is one that the Scottish Government are seeking to trial in suitable projects.